> My husband used to talk about going to grad school and his grandfather generously gifted him a check that I believe was around $10,000 4-5 years ago, apparently had to do some taxes differently, and says the money is trackable by the irs and cannot be used on anything other that school tuition. Is this true?

No, it's not true.

If someone pays your tuition or medical bill directly, it is considered a gift to you, but it is completely unlimited in any regard.

If someone gives you money with no expection of getting anything back, it is a gift and has reporting thresholds. Maybe the reporting threshold was $10k Reporting threshold was $14k in 2017. But there is no restriction what the recipient can use it for.

Maybe it was actually a 529 distribution?

• No limit for college/university tuition expenses
• Up to $10k can be spent for K-12 tuition expenses (SECURE Act 1.0)

This still doesn't restrict what the recipient can use it for. It'll just get the 529 owner in tax penalties if used for disallowed purposes.